(2)register with any applicable self-regulatory organization (as defined in section
78c(a)(26) of this title);

(3)provide such disclosures, including disclosures related to risks and other investor education materials, as the Commission shall, by rule, determine appropriate;

(4)ensure that each investor—

(A)reviews investor-education information, in accordance with standards established by the Commission, by rule;

(B)positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and

(C)answers questions demonstrating—

(i)an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;

(ii)an understanding of the risk of illiquidity; and

(iii)an understanding of such other matters as the Commission determines appropriate, by rule;

(5)take such measures to reduce the risk of fraud with respect to such transactions, as established by the Commission, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person;

(6)not later than 21 days prior to the first day on which securities are sold to any investor (or such other period as the Commission may establish), make available to the Commission and to potential investors any information provided by the issuer pursuant to subsection (b);

(7)ensure that all offering proceeds are only provided to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest, as the Commission shall, by rule, determine appropriate;

(8)make such efforts as the Commission determines appropriate, by rule, to ensure that no investor in a 12-month period has purchased securities offered pursuant to section
77d(6)[1] of this title that, in the aggregate, from all issuers, exceed the investment limits set forth in section
77d(6)(B)[1] of this title;

(9)take such steps to protect the privacy of information collected from investors as the Commission shall, by rule, determine appropriate;

(10)not compensate promoters, finders, or lead generators for providing the broker or funding portal with the personal identifying information of any potential investor;

(11)prohibit its directors, officers, or partners (or any person occupying a similar status or performing a similar function) from having any financial interest in an issuer using its services; and

(12)meet such other requirements as the Commission may, by rule, prescribe, for the protection of investors and in the public interest.

(b) Requirements for issuers

For purposes of section
77d(6)[1] of this title, an issuer who offers or sells securities shall—

(1)file with the Commission and provide to investors and the relevant broker or funding portal, and make available to potential investors—

(B)the names of the directors and officers (and any persons occupying a similar status or performing a similar function), and each person holding more than 20 percent of the shares of the issuer;

(C)a description of the business of the issuer and the anticipated business plan of the issuer;

(D)a description of the financial condition of the issuer, including, for offerings that, together with all other offerings of the issuer under section
77d(6)[1] of this title within the preceding 12-month period, have, in the aggregate, target offering amounts of—

(i)$100,000 or less—

(I)the income tax returns filed by the issuer for the most recently completed year (if any); and

(II)financial statements of the issuer, which shall be certified by the principal executive officer of the issuer to be true and complete in all material respects;

(ii)more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant who is independent of the issuer, using professional standards and procedures for such review or standards and procedures established by the Commission, by rule, for such purpose; and

(iii)more than $500,000 (or such other amount as the Commission may establish, by rule), audited financial statements;

(E)a description of the stated purpose and intended use of the proceeds of the offering sought by the issuer with respect to the target offering amount;

(F)the target offering amount, the deadline to reach the target offering amount, and regular updates regarding the progress of the issuer in meeting the target offering amount;

(G)the price to the public of the securities or the method for determining the price, provided that, prior to sale, each investor shall be provided in writing the final price and all required disclosures, with a reasonable opportunity to rescind the commitment to purchase the securities;

(H)a description of the ownership and capital structure of the issuer, including—

(i)terms of the securities of the issuer being offered and each other class of security of the issuer, including how such terms may be modified, and a summary of the differences between such securities, including how the rights of the securities being offered may be materially limited, diluted, or qualified by the rights of any other class of security of the issuer;

(ii)a description of how the exercise of the rights held by the principal shareholders of the issuer could negatively impact the purchasers of the securities being offered;

(iii)the name and ownership level of each existing shareholder who owns more than 20 percent of any class of the securities of the issuer;

(iv)how the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions; and

(v)the risks to purchasers of the securities relating to minority ownership in the issuer, the risks associated with corporate actions, including additional issuances of shares, a sale of the issuer or of assets of the issuer, or transactions with related parties; and

(I)such other information as the Commission may, by rule, prescribe, for the protection of investors and in the public interest;

(2)not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker;

(3)not compensate or commit to compensate, directly or indirectly, any person to promote its offerings through communication channels provided by a broker or funding portal, without taking such steps as the Commission shall, by rule, require to ensure that such person clearly discloses the receipt, past or prospective, of such compensation, upon each instance of such promotional communication;

(4)not less than annually, file with the Commission and provide to investors reports of the results of operations and financial statements of the issuer, as the Commission shall, by rule, determine appropriate, subject to such exceptions and termination dates as the Commission may establish, by rule; and

(5)comply with such other requirements as the Commission may, by rule, prescribe, for the protection of investors and in the public interest.

(c) Liability for material misstatements and omissions

(1) Actions authorized

(A) In general

Subject to paragraph (2), a person who purchases a security in a transaction exempted by the provisions of section
77d(6)[1] of this title may bring an action against an issuer described in paragraph (2), either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if such person no longer owns the security.

(B) Liability

An action brought under this paragraph shall be subject to the provisions of section
77l(b) of this title and section
77m of this title, as if the liability were created under section
77l(a)(2) of this title.

(2) Applicability

An issuer shall be liable in an action under paragraph (1), if the issuer—

(A)by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by any means of any written or oral communication, in the offering or sale of a security in a transaction exempted by the provisions of section
77d(6)[1] of this title, makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of such untruth or omission; and

(B)does not sustain the burden of proof that such issuer did not know, and in the exercise of reasonable care could not have known, of such untruth or omission.

(3) Definition

As used in this subsection, the term “issuer” includes any person who is a director or partner of the issuer, and the principal executive officer or officers, principal financial officer, and controller or principal accounting officer of the issuer (and any person occupying a similar status or performing a similar function) that offers or sells a security in a transaction exempted by the provisions of section
77d(6)[1] of this title, and any person who offers or sells the security in such offering.

(d) Information available to States

The Commission shall make, or shall cause to be made by the relevant broker or funding portal, the information described in subsection (b) and such other information as the Commission, by rule, determines appropriate, available to the securities commission (or any agency or office performing like functions) of each State and territory of the United States and the District of Columbia.

(e) Restrictions on sales

Securities issued pursuant to a transaction described in section
77d(6)[1] of this title—

(1)may not be transferred by the purchaser of such securities during the 1-year period beginning on the date of purchase, unless such securities are transferred—

(A)to the issuer of the securities;

(B)to an accredited investor;

(C)as part of an offering registered with the Commission; or

(D)to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance, in the discretion of the Commission; and

(2)shall be subject to such other limitations as the Commission shall, by rule, establish.

(f) Applicability

Section
77d(6)[1] of this title shall not apply to transactions involving the offer or sale of securities by any issuer that—

(1)is not organized under and subject to the laws of a State or territory of the United States or the District of Columbia;

(2)is subject to the requirement to file reports pursuant to section
78m of this title or section
78o(d) of this title;

(3)is an investment company, as defined in section
80a–3 of this title, or is excluded from the definition of investment company by section
80a–3(b) of this title or section
80a–3(c) of this title; or

(4)the Commission, by rule or regulation, determines appropriate.

(g) Rule of construction

Nothing in this section or section
77d(6)[1] of this title shall be construed as preventing an issuer from raising capital through methods not described under section
77d(6)[1] of this title.

(h) Certain calculations

(1) Dollar amounts

Dollar amounts in section
77d(6)[1] of this title and subsection (b) of this section shall be adjusted by the Commission not less frequently than once every 5 years, by notice published in the Federal Register to reflect any change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics.

(2) Income and net worth

The income and net worth of a natural person under section
77d(6)(B)[1] of this title shall be calculated in accordance with any rules of the Commission under this subchapter regarding the calculation of the income and net worth, respectively, of an accredited investor.